TransMedics Group Inc. (TMDX) stock took a nosedive on Tuesday, plummeting over 30% after the organ transplant medtech company reported disappointing third-quarter earnings. While the company saw a significant 64% year-over-year increase in revenue, reaching $108.8 million, it missed analysts’ expectations on both the top and bottom lines.
The company’s earnings per share (EPS) came in at $0.12, falling short of the consensus estimate of $0.30. Similarly, revenue also fell short of expectations, missing the consensus estimate of $115 million. The growth in revenue was driven primarily by increased utilization of the company’s Organ Care System (OCS) across all three organs through the National OCS Program (NOP). TransMedics also generated additional revenue from its logistics services.
Despite the miss, TransMedics remains optimistic about its future prospects. The company cited a higher proportion of service revenue compared to product revenue as a reason for the decline in gross margin, which fell to 56% from 61% in the third quarter of 2023. Despite this, the company maintains its commitment to reaching its target of 10,000 OCS transplant cases per year in the U.S. by 2028.
For the full fiscal year 2024, TransMedics expects sales to reach between $425 million and $445 million, compared to the consensus estimate of $444.4 million.
While the company’s performance for the third quarter fell short of expectations, several analysts remain optimistic about TransMedics’ long-term potential. William Blair, for instance, believes that TransMedics stands out as one of the top organic growth stories in their coverage, citing the company’s significant untapped market opportunity.
Analysts attributed the disappointing performance to a confluence of factors, including seasonal weakness in the industry, scheduled maintenance for several planes used for organ transport, and a recent slowdown in U.S. organ transplant volumes. However, industry data suggests that these factors are likely temporary.
Despite the recent setbacks, several analysts remain bullish on the company’s future prospects. Needham maintains its Buy rating on TransMedics, though it lowered its price target from $208 to $109. Baird reiterates its Outperform rating and lowers its price target from $200 to $150. Canaccord Genuity maintains its Buy rating, lowering the price target from $169 to $109. Oppenheimer keeps its Outperform rating and lowers the price target from $200 to $125. JP Morgan also maintains its Overweight rating, lowering the price target from $173 to $116. Piper Sandler maintains its Overweight rating and a $180 price target.
With several analysts maintaining positive sentiment and a strong market opportunity ahead, TransMedics Group Inc. (TMDX) remains a company to watch in the medtech space.
